I'm glad you were online to discuss this because you bring up very good points. I also think it would be hazzardous for any solar installer to recommend anything other than what is prescribed in §136 & §48 and to treat the payment from the City of Austin and PSP as subsidies.

I've been a CPA working in tax since 1992 and would consider this point one where the tax code and associated regulations don't properly cover all the situations that can arise. When dealing with the IRS, value can alway be argued when no standard exists. I have also seen similar tax court cases where mineral rights were exchanged for consideration even though it had never been established there were any minerals to be had on the property. So, even though there were currently no minerals, the rights to any that might come about in the future have an assignable fair market value.

There are numberous questions and ensuing arguments surrounding this issue including: 1) What is my cost basis in my rights to the PV Credit?; 2) What is the value of my rights to the PV Credits?; 3) Should the payment from the city of austin be segregated into amounts paid as an incentive and an amount paid for the rights based on their FMV?

My point being that just because there isn't a market for our PV credits today, the rights to our credits may and that value is fuzzy.

I had a very bright law professior who used to say "Tell me a story". What he meant was that the law was often unclear and the actual answers to tax law questions are based around the facts and circumstances of the situation.

It is unclear whether or not this arguement would hold up under examination by the IRS, but it does have validity. The position is not without risk, but I do believe it will give a favorable current benefit.